Modelling Social Entrepreneurship: Consideration of the Reacting Forces

Abstract

The field of social entrepreneurship has taken off with the explosive growth of different versions of the phenomena, like micro-credit, and with greater support, as from Ashoka and the Gates Foundation, but it remains lagging in theoretical understanding. We build upon the model of social entrepreneurship as a four unit system. We generate four new propositions based on existing theory describing social entrepreneurship as addressing market failures and as a behavioural process. Specifically, our propositions summarise our analysis of how the context and targets of social entrepreneurship activity co-evolve in the system, actively affecting outcomes initiated by social entrepreneurs’ behaviours.

Keywords:

• Social entrepreneurship
• reacting forces
• theoretical system
• market failures
• bounded rationality

Ethical approval

No human subjects or animal participants were involved in this research. This article does not contain any studies with human participants or animals performed by any of the authors.

Disclosure statement

The authors have no conflicts of interest arising from this paper.

Notes

1 Several literatures have been drawn from to add insight into social entrepreneurship phenomena, including sociology, communications, innovation, institution-related, and process-oriented research (e.g. Battilana and Lee 2014; Garud, Gehman, and Giuliani 2014; Hargadon and Douglas 2001; Miller et al. 2012; Navis and Glynn 2010). Given this note is not a review, we do not cover all of these approaches, but instead offer a complementary work to one approach, partly based on the strategy literature.

2 This framework resembles Sahlman’s (1996) used by Austin, Stevenson, and Wei-Skillern (2006), consisting of people, deal, context, and opportunity. In strategic management, the four parts are industry (as context), opportunity (or threat in that context), firm (as focal entity), and strategy.

3 Note that important social issues involving contexts-that-cross-borders are not the focus here – as when acid rain or global warming or other activities cause effects that also occur outside of the originating context. However, such issues are also less likely to be addressed by entrepreneurs rather than by internationally powerful coalitions. Which is not to say that social entrepreneurship cannot have an effect on addressing such grand challenges (e.g. Ferraro, Etzion, and Gehman 2015; Howard-Grenville et al. 2014).

4 The three-section model of the contextual landscape is consistent with descriptions in institutional and social embeddedness effects on entrepreneurial activity. Baumol’s (1990) delineation of three types of entrepreneurial activity (i.e. productive, unproductive and destructive) is based on three institutional contexts incentivizing those foci historically. Here, we focus on contexts that are friendly, benign and unfriendly to productive-social entrepreneurship. Similarly, we consider contextual embeddedness over a range that supports to constrains (and further even opposes) social entrepreneurship activity (e.g. Elmes et al. 2012).

5 That point of discontinuity occurs where the reaction by the context could be characterized as threatening (or even violent) to further social entrepreneurship activity, to the point where the net marginal effect of further activity will be negative (i.e. it will cause more harm than benefit to its targets). At this point, the context is highly corrupt, exploiting the possible targets of social entrepreneurship and even punishing them for requesting or receiving it, in order to make them more reliant on what is likely the despotic, kleptocratic state (where local resources are lacking or minimal given any excess is stolen).

6 To be clear, a bettering context is one in which social entrepreneurship is influencing not only the targets but also the institutions (e.g. Chandra 2017) in such a way as to increase further formal and informal support (and decrease constraints) for further such activity that increases social welfare over time (e.g. as often described in social embeddedness work – Elmes et al. 2012; Gordon, Kayseas, and Moroz 2017). By contrast, a worsening context is one in which the mostly formal institutions (usually through concentrated political or military power) decrease support and increase constraints (if not opposition to) further social entrepreneurship activity.

7 We build on the awareness-motivation-capabilities framework (del Val and Fuentes 2003; Venkataraman, Chen, and MacMillan 1997) by adding ‘execution’ to the set of necessary requirements to complete the process of addressing a problem (as separate from generic ‘capabilities’ – Dosi, Nelson, and Winter 2000 – where the resources to do the job exist but not the experience, expertise and flexibility to see the job through to completion) in order to create the ACME conceptualization. This aligns well with other relevant versions, such as Rest’s (1994) four activities for moral behavior (that includes follow-through).

8 Most of the related literatures that consider the contextual influences on social entrepreneurship do so differently than our more direct and active description of targets. Ours is more than institutional structuration (e.g. Giddens 1984) or simple embeddedness; it is an explicit accounting for an element in the system (e.g. Dzombak et al. 2014) that is usually considered as ‘weak’ or ‘begging’ or ‘dependent’ as a whole rather than being seen as having some capacity for strong interdependent action on at least some dimension (e.g. marketing to attract entrepreneurial attention) of its whole (the latter being a possibility that the systems-theory-social-entrepreneurship stream has not yet considered).

9 A new challenge of dealing with the lower left quadrant of the prospect theory (e.g. Kahneman and Tversky 1979), where there is negative real value and negative utility, is that for contexts where targets value retaining their heritage, the shapes of the utility functions may reveal unusual outcomes when the movements from a negative value position (where market failure social problems are assumed to be located) include utility-level increases arising from activities that change that heritage. It may be that curves bend a different way than in past analyses, so much so that there is less risk-aversion under certain changes entailed by possible solutions. The full analysis is left for future work.

10 Our analysis and arguments take a different approach to the interaction of social entrepreneurs and contexts than most work in previous streams of related literature. For example, instead of modeling the context as ‘given’ and adapted to by the entrepreneur in her behavior (e.g. Johns 2006), we considered the context as reacting to the entrepreneur’s activity, even over time (and, with an inclusion of an expected discontinuity). This was less a story of embeddedness, and more one of interdependence, than provided in previous modeling. Furthermore, we appear to have broken new ground by modeling the targets in those contexts as pro-active rather than as passive. We believe that ‘turning the assumed (power) relations on their heads’ is a useful exercise in rounding out the understanding of the complex phenomenon that is social entrepreneurship.

11 Some measures exist while others may have to be created and validated. Measures exist for entrepreneurial activity levels, for governmental corruption level, for awareness, for motivation, for capabilities, and for execution. Measures of tactics that increase awareness and motivation, for example, may have to be newly constructed.

12 To violate the old economist joke, social entrepreneurs do assume a can-opener exists in order to address the ‘imagination asymmetries’ between what they envision as a better world and what others do not. They sell their vision based on logically calculating through the possible ‘what-ifs’ under the current technological and social trajectories, under the reasonable changes to current institutional and informational constraints, and the under alternative ways to transact (e.g. through community-based trust and peer-pressure versus through a legal system). That envisioning exercise not only can help sell the initiation of a breakthrough solution (Garud and Karnoe 2003), but can also be quite helpful in reducing future implementation bottlenecks, setting up proper new measures for evaluating progress (Anica et al. 2013; Emerson 2003; Kroeger and Weber 2014; Lingane and Olsen 2004; Tuan 2008), and allowing stakeholders to understand and participate in the process.